Announcement

MKTUPDTE: WHS: Trading Update

11 Jan 2018 08:58

NZX

TRADING UPDATE
Auckland, 11th January 2018
The Warehouse Group confirms improving trajectory after encouraging Christmas
trading.
The Board of The Warehouse Group (the Group) today reported that the
Christmas trading period had demonstrated an improving trend despite the
radical shift in go-to-market strategy in the Red Sheds. Same Store Sales
were down (2.8%) over the critical Christmas period compared to the Q1 rate
of (4.0%). Year on Year unit sales show an increase of 5.1% with
transactions rising 2.9% in conjunction with strong sell-through of seasonal
lines. As expected the move from Hi-Lo to Every Day Low Price (EDLP) in the
Warehouse ''Red Sheds'' coupled with a one-time reduction in ranges and
consequent clearance activity has resulted in a reduced Average Selling
Price, however margin rates on current products have generally improved, and
customers'' reaction to the pricing changes and product improvements have been
very positive. Further work is in progress around price elasticity with a
view to improving gross margins and the one-off clearance of discontinued
products is on track.
Warehouse Stationery ''Blue Sheds'' is preparing for its peak Back to School
trading season, however we expect sales to be down approximately 6.5% at the
first half (H1) based on softer performance of communications and technology
segments, and the one-off impact of the integration of the Blue Sheds''
business onto core Red Sheds operating systems at the start of the financial
year.
Noel Leeming continues to perform strongly. Likewise, Torpedo7 retail has
been steadily improving during the year.
Nick Grayston, Group CEO said, "While we are all keen to start delivering the
benefits of our transformation, we have a long way to go, but these are
encouraging signs. H1 trading to date has confirmed for us that our
customers like and have responded well to our pricing and product changes.
We continue to invest in technology and build out the team to execute the
next steps in our change programs."
Our forecast for H1 Adjusted Net Profit from continuing operations for the
Group is $32m-$35m, which is 22%-28% down on the comparative continuing
operations performance last year. The result for the half includes a
significant accrual for a redesigned incentive programme, intended to reward
better than expected financial performance along with reinforcing specific
behaviours necessary to execute the transformation. It recognises the need to
retain staff and recruit top global talent through this rapid period of
radical transition. If the second half year (H2) performance fails to deliver
on our improved outlook, the accrual will be reversed to profit. If not for
the accrual, our financial performance in H1 would be close to last year''s.
Many of the operational impacts on profit performance are transitional in
nature and not expected to recur, however Joan Withers, Chair of the Board of
Directors reiterated that, "the Warehouse Group is in the process of a
fundamental transformation to improve performance and profitability, which is
our key focus for 2018." Full Year guidance will be issued when the H1
financial results are released on March 8 2018.
ENDS
The Warehouse Group Limited comprises 93 Warehouse stores, 79 Noel Leeming
stores and 70 Warehouse Stationery stores in New Zealand and 11 Torpedo7
stores. The company had turnover of $3.0 billion in FY17 and employs over
12,000 people.
Contact details regarding this announcement:
Media
Nick Graytson, Group CEO, to be contacted via
Kim Russell: +64 9488 3285 ext 96725 or on Mobile: +64 21 452 860
Investors and Analysts
Mark Yeoman
Group Chief Financial Officer
Mobile: +64 21 778 414
End CA:00312938 For:WHS Type:MKTUPDTE Time:2018-01-11 08:58:19